U4 Customer Profitability Analysis, Lifetime Value, and Benchmarking

Question 1

According to some statistics, every household in Europe has approximately ————– customer
loyalty cards. This underscores the importance of ?

Answer 1

four

customer relationship management
and the attention businesses give to such programs.

Question 2

According to some statistics, every household in Europe has approximately four customer
loyalty cards. This underscores the importance of customer relationship management
and the attention businesses give to such programs. This is a result of?

Answer 2

a quest
for sustainable competitive advantage whereby managers have sought to differentiate
their company by focusing on customers and becoming more active in their communication
with them.

Question 3

Companies are constantly looking for strategies to improve customer
experience, e.g.?

Answer 3

providing better product and service quality.

Question 4

The problem, however, can
be that a satisfied and loyal customer, who buys the company’s products over and over
again, may not necessarily lead to ——————————————–. This means applying —————to improve customer loyalty do not necessarily increase profits in and of themselves.

Answer 4

company profits

strategies

Question 5

Both measuring the improvements in quality and the profits from different customers
or customer groups require?

Answer 5

performance measurement techniques.

Question 6

In this section we
want to focus on the aspect of customer profitability and how customer profitability
analysis such as customer lifetime value can guide companies in their customer loyalty
efforts.

Question 7

Profitability Analysis

In this section we want to introduce the idea and concept of customer profitability
analysis. A customer profitability analysis is?

Answer 7

an evaluation process which focuses on
assigning costs and revenues to segments of the customer base, instead of assigning
revenues and costs to the actual products or the units or departments which compose
the corporate structure of the producer.

Question 8

A customer profitability analysis is an evaluation process which focuses on
assigning costs and revenues to segments of the customer base, instead of assigning
revenues and costs to the actual products or the units or departments which compose
the corporate structure of the producer. Approaching profitability from this angle can
sometimes provide?

Answer 8

valuable insights into how each step of the process of designing,
manufacturing, and ultimately selling goods or services incurs cost and generates revenue.

Question 9

Many businesses use a customer profitability analysis as a means of streamlining
processes in order to?

Answer 9

provide the highest degree of efficiency and return while generating
the lowest degree of cost.

Question 10

Increased customer costs can result from services such as:

Answer 10

• smaller order quantities
• customized and/or more frequent deliveries
• producing and/or stocking a greater number of products
• requirement to hold inventory
• increasing necessity for post-sales support

Question 11

Dealing with these extra costs may require?

Answer 11

an organization to charge for selected services,
cut back on services provided, increase efficiency of those services, renegotiate
contracts or even terminate a business relation with a customer.

Question 12

Awareness of customer
costs and profitability is crucial to ?

Answer 12

making the right decisions about current and
potential customers.

Question 13

In actual practice, a customer profitability analysis looks at each segment of the process
of?

Answer 13

creating and selling products to customers.

Question 14

The idea is to look closely at the
=========== which are associated with each of those ==========.

Answer 14

costs

segments

Question 15

These costs are then compared
with the gains which were achieved from?

Answer 15

the processes and procedures connected
with the operation of that segment.

Question 16

Breaking down the task into segments makes it
much easier to?

Answer 16

identify what is actually working to increase profitability with a major
client or a group of clients within the customer base.

Question 17

Eventually, this process will provide
clarity about elements which may contain ?

Answer 17

potential for earning more revenue from
those same clients.

Question 18

Apart from providing valuable information about all aspects of the business operation and their capability to earn maximum profits, a customer profitability analysis can also help to?

Answer 18

identify factors which could have a negative impact on the future of the company.

Question 19

For example,

Answer 19

most customer profitability analysis templates allow for determining what percentage of revenue is generated from a given customer or group of customers.

Question 20

There are cases when analysis makes it clear that the company is depending on?

Answer 20

two or three large customers to generate half or more of its business volume.

Question 21

In such a case, steps are taken to diversify and expand the —————————-, often by attracting more ———————————–customers.

Answer 21

client base

small- to mid-sized

Question 22

As a result, the business is less likely to be at risk should one of those major clients decide to
——————-, since an increased bank of smaller customers (who are—————————————————————) account for a larger share of the ——————revenue.

Answer 22

withdraw

less likely to opt out of the business relation

monthly

Question 23

A proper customer profitability analysis will also look closely at?

Answer 23

how much of the company’s resources are dedicated to producing goods and services for specific clients.

Question 24

The idea is to determine?

Answer 24

whether the maximum benefit is being earned from the current use of those resources,

or if there is some way to allocate a portion of those resources to other functions while still satisfying the customer.

Question 25

Re-allocating resources also makes it possible to?

Answer 25

engage in responsible cost allocation, which in turn strengthens the business in the long term.

Question 26

Generally, organizations work with customer profitability analysis via using the methodology called?

Answer 26

activity-based costing.

Question 27

Determination of Customer Process\/Activity & Customer-Specific Costs

These factors include:

Answer 27

cost sales,
customer service,
warranty department etc.

Question 28

each of these specific costs is relevant for

Answer 28

all customers.

Question 29

It is of crucial importance to identify and understand these costs as well as ?

Answer 29

the major activities included and the key cost drivers.

Question 30

These costs can be benchmarked internally and externally and best practices can be?

Answer 30

identified and implemented.

Question 31

As a result, costs cannot only be better assigned to customers, but opportunities to ?

Answer 31

reduce or redirect them can be identified in order to decrease the total cost to serve the cus­tomer (see below).

Question 32

Figure 6: Determination of Customer Process\/Activity and Customer-Specific Costs

Question 33

Figure 6: Determination of Customer Process\/Activity and Customer-Specific Costs

Question 34

Figure 6: Determination of Customer Process\/Activity and Customer-Specific Costs

Question 35

Figure 6: Determination of Customer Process\/Activity and Customer-Specific Costs

Question 36

Determination of customer profitability

All revenue and costs need to be?

Answer 36

matched with customers so that profit can be determined.

Question 37

This information is critical to?

Answer 37

= support decisions with regard to strategic pricing,
=contract negotiations,
=and rationalizing customers or the services provided to them
=as well as implementing new services and seeking new customers.

Question 38

Figure 7: Customer Profitability Framework

Question 39

Figure 7: Customer Profitability Framework

Question 40

Figure 7: Customer Profitability Framework

Question 41

Determination of customer cost and customer profitability becomes critical for =======================================. Awareness of total costs for particular processes and activities in cus­tomer assessing allows for a focus on ==========================================.

Answer 41

an organization and its efficiency

reducing those costs and controlling them

Question 42

Knowing costs for specific customers enables a business to?

Answer 42

reduce these services, change them, or charge additional compensation.

Question 43

As mentioned above, the determination of customer costs and profitability can be performed by using?

Answer 43

activity based costing calculations.

Question 44

The calculation is accurate and straightforward, despite the fact that it requires the availability of ————————————–data. Plus, there is an obvious advantage for an organization, since customer cost and profitability information becomes vital to an organization.

Answer 44

customer-related

Question 45

If the right data is not available or does not exist, it must be?

Answer 45

made available or created.

Question 46

Customer Lifetime Value

For many years organizations focused primarily on?

Answer 46

acquiring new customers, without taking into consideration how many purchases an individual customer made.

Question 47

Acquiring a large number of customers who only purchase once is
not ?

Answer 47

an optimal strategy.

Question 48

Instead, businesses should concentrate on ?

Answer 48

identifying how much each customer contributes to the overall profit and performance of the organization.

Question 49

The customer lifetime value tries to provide this information by?

Answer 49

measuring the worth of a customer to the company.

Question 50

With this information businesses can?

Answer 50

rank order their customers and formulate different strategies.

In other words, customer lifetime value helps organizations to treat customers differently based on their overall contribution to the company’s returns.

Question 51

As a result, customer lifetime value addresses the following issues:

Answer 51

Calculating customer lifetime value helps companies to understand how much they can invest in retaining a customer while still achieving a positive return on investment (ROI).

Answer 52

Once the organization has calculated the customer lifetime value, it can optimally allocate its limited resources to maximize returns. Based on a customer-centric view, the customer lifetime value framework helps to select the right marketing strategies and activities.

Answer 53

Using customer lifetime value as a marketing metric provides an incentive for managers to place greater emphasis on customer service and long-term customer satisfaction for the right set of customers instead of maximizing short-term sales.

Question 54

We will discuss different approaches to estimate the customer lifetime value, but conception­ally the customer lifetime value is calculated by?

Answer 54

discounting the forecasted net cash flows with the risk-adjusted cost of capital often referred to as the weighted average cost of capital (WACC).

Question 55

A comprehensive understanding of customer value comprises all different aspects of ?

Answer 55

a customer’s contribution to the organization’s efficiency and the business success.

Question 56

Therefore, the customer lifetime value can assist to ?

Answer 56

gain a profound understanding of customer value.

Question 57

The customer lifetime value measures the profit streams of?

Answer 57

a customer across the entire cus­tomer life cycle.

Question 58

While traditional metrics do not take into consideration the probability of —————————————-, customer lifetime value incorporates these aspects and is able to give managers a ————————————————.

Answer 58

customers being active

much better perspective

Question 59

It is clear that the customer lifetime value represents an application of the principles of?

Answer 59

con­temporary finance to contribute to the evaluation of customer relations.

Question 60

The model is aimed at assigning a profitability figure to the customer, which is based on?

Answer 60

profit forecasts and ­directly referable to in-payments and out-payments.

Question 61

This procedure also explains all those effects which go beyond transactions performed by customers such as:

Answer 61

advertising the products to other potential customers through word-of-mouth marketing.

Question 62

By segmenting customers across different dimensions and groups, businesses can better align?

Answer 62

their marketing,
sales,
and services
and allocate their resources and expenditures to optimize long-term customer value leading to long-term profitability.

Question 63

However, despite the fact that a considerable number of customer lifetime value models have been developed until today,

Answer 63

there is no one approach which is widely accepted or superior to others.

Question 64

Studying the basic customer lifetime value models reveals that different incorporated variables can generally be classified in three basic categories:

Answer 64

=retention rate
=revenue
=costs

Question 65

When considering the practical side, which is characterized by ?

Answer 65

large and heterogeneous cus­tomer groups, the theory suggests that organizations should divide their customer bases into homogeneous segments which possess different lifetime values.

Question 66

In order to create sufficiently detailed individual customer lifetime values, and minimize calculation efforts at the same time, each value component needs to be?

Answer 66

calculated separately for each customer segment.

Question 67

These specific value figures of each group will then serve as?

Answer 67

a basis for the calculation of individual customer lifetime values.

Question 68

Retention Rate

Answer 68

The retention rate is a factor which is typically defined with regard to the individual customer.

It refers to the possibility that an individual customer remains loyal to a particular supplier and keeps yielding expected revenue,

as well as costs, within a fixed period of time.

Question 69

By means of retention rates, anticipated contribution margins are adjusted to?

Answer 69

the probability of occurrence.

Question 70

The retention rate can be estimated with the help of empirically validated factors of loyalty, such as?

Answer 70

customer satisfaction, switching barriers, variety-seeking behavior and attractiveness of alternatives.

Question 71

In 1999, S. Peter introduced the ‘LISREL-Approach’ which is ?

Answer 71

the ‘LISREL-Approach’

Question 72

In 1999, S. Peter introduced the ‘LISREL-Approach’ which is ?

Answer 72

concerned with adequate analytical instruments to quantify the direction and strength of different cus­tomer-related factors.

Question 73

Additional starting points for the analysis of retention rates are ?

Answer 73

customer loyalty models which cover different kinds of relationship settings (e.g. contractual vs. non-contractual).

Question 74

In contractual settings, represented by the ‘lost-for-good model’, the customer is?

Answer 74

either totally committed to the vendor or totally left alone.

Question 75

In this case, the retention rate and expected revenues can be forecasted fairly accurately, depending on?

Answer 75

the usage of the services in the previous period and the contract terms.

Question 76

Other practical approaches which are more widely known as migration models, are often based on?

Answer 76

Markov-chains and are related to non-contractual situations in which customers split their category expenses among several organizations or companies.

Question 77

In this ‘always-a share’ case, the retention rate is not regarded to be stable, but ?

Answer 77

a dynamic factor reflecting changes in purchase behavior throughout the entire customer life cycle.

Question 78

RevenueThe second component-revenue-can be divided into four sub-categories:

Answer 78

-autonomous revenue
-up-selling revenuecross-selling revenue
-contribution margins which are all resulting from referral activities of existing customers

Question 79

These aspects play a key role in ?

Answer 79

compiling a complete record of effects of a customer’s commercial behavior over the life cycle and are essential to the identification of operative starting points for controlling these effects.

Question 80

The autonomous revenue represents factors which are not directly influenced by?

Answer 80

the organization or only affected by standard marketing measures such as TV advertising.

Question 81

Therefore, this refers to basic revenue excluding targeted measures to ?

Answer 81

increase sales or cross sales.

Question 82

Calculation is usually performed by means of ?

Answer 82

traditional procedures of demand forecast.

Question 83

Those means include :

Answer 83

analysis of time sequences or stochastic brand choice frameworks such as the multi­nomial ‘Logit’ model.

Question 84

Up-selling revenue is yielded by?

Answer 84

the additional selling of the same product as a consequence of increased purchase frequency and intensity in long-life relationships (otherwise known as quantity effect, i.e. higher purchase amount per transaction and more transactions per period).

Question 85

Up-selling revenue also emerges from?

Answer 85

a price effect which is created by selling higher-priced substitutes of the same category to loyal, long-term customers who are less price-sensitive. Therefore, up-selling revenues symbolize the retention value of a customer.

Question 86

Up-selling revenue also emerges from a price effect which is created by selling higher-priced substitutes of the same category to loyal, long-term customers who are less price-sensitive.

Answer 86

Therefore, up-selling revenues symbolize the retention value of a customer.

Question 87

Cross selling revenues, in contrast to up-selling ones, can be defined as?

Answer 87

the selling of complementary products or product categories which have not been bought from the vendor such as selling life insurance to an automobile insurance customer.

Question 88

The reference value measures margins which stem from new customers who were?

Answer 88

gained through the referral behavior of existing customers.

Question 89

Its estimation can, for example,

Answer 89

be accomplished with the help of the reference value model developed by Cornelsen in 2000.

Question 90

Costs

Answer 90

The principle methods for predicting customer costs are those which are commonly applied in product-related accounting.

Question 91

Solely the reference object has changed over various stages from the product to the customer. The traditional forecast methods are being supplemented by?

Answer 91

findings about cost-reducing effects of long-term customer relationships.

Question 92

Acquisition costs

Answer 92

This type of cost has to be considered when contemplating the customer lifetime value of a future customer.

Question 93

With regard to existing customers, this cost has to be booked as?

Answer 93

a submerged cost.

Question 94

Since this cost arises only once, it may be characterized as ?

Answer 94

an organization’s irreversible investment in the customer.

Question 95

Its customer-specific calculation and assignment is based on ?

Answer 95

the acquisition procedure used (e.g. direct marketing vs. mass marketing through advertising).

Question 96

Marketing costs represent costs of ?

Answer 96

customer retention and development.

Question 97

This type of costs comprise all marketing measures aimed at?

Answer 97

the improvement of customer profitability,

Question 98

for example

Answer 98

when the customer’s attention is drawn to higher-priced variants (up-selling) or other product categories of the same company (cross-selling).

Question 99

when the customer’s attention is drawn to higher-priced variants (up-selling) or other product categories of the same company (cross-selling).

Answer 99

=Promotional expenditures and costs for soliciting,
=mailing catalogues or sending personalized greeting cards belong to this category.

Question 100

Sales costs include both?

Answer 100

the production costs of the goods and all costs of serving the customer, including the cost of order procession, handling, warehousing, and shipping.

Question 101

When a customer ends his business relationship and is not regarded to be worthy of recovering, an organization needs to?

Answer 101

include the costs of terminating that business relationship in its calculation of ‘final costs’.

Question 102

The administrative expenses when closing an account or costs of taking back mature products are?

Answer 102

aspects which have not been integrated into a customer lifetime value model so far.

Question 103

All in all, the following graph illustrates the main phases of ?

Answer 103

the customer lifetime cycle and depicts how it relates to the different costs and revenue which occur.

Question 104

Figure 8: Customer Lifetime Phases

Question 105

Figure 8: Customer Lifetime Phases

Question 106

An appropriate calculation of customer lifetime value has to consider all elements included in:

Answer 106

customer value, as well as all sorts of indirect monetary contributions, such as information, cooperation and innovation value.

Question 107

Calculating Customer Lifetime Value
Based on the main elements introduced and explained in the previous section, the customer lifetime value can be calculated in five steps:

Answer 107

The first component is the gross contribution margin, defined as the difference between recurring revenues minus recurring costs.

Answer 108

Gross contribution margin minus marketing costs results in the net margin.

Answer 109

If the net margin is constant over time, it can be multiplied by the number of purchases which are expected within a given time frame resulting in the accumulated margin. In many cases, the net margin and the number of expected purchases changes from period to period, hence the accumulated margin or gross profit needs to be calculated per period.

Answer 110

If the net margin is constant over time, it can be multiplied by the number of purchases which are expected within a given time frame resulting in the accumulated margin. In many cases, the net margin and the number of expected purchases changes from period to period, hence the accumulated margin or gross profit needs to be calculated per period.

Answer 111

The gross profit or accumulated margin needs to be corrected by any acquisition costs which usually only occur in the first period.

Answer 112

Finally, the results per period need to be discounted to calculate the net present value of the profit per period and the cumulative net present value over all periods. This results in the customer lifetime value. As mentioned earlier, the discount rate is usually estimated by the weighted average capital costs (WACC). However, there may be reasons to use a different factor as a discount rate.

Answer 113

Finally, the results per period need to be discounted to calculate the net present value of the profit per period and the cumulative net present value over all periods. This results in the customer lifetime value. As mentioned earlier, the discount rate is usually estimated by the weighted average capital costs (WACC). However, there may be reasons to use a different factor as a discount rate.

Question 114

The next graph illustrates the five steps to calculate the customer lifetime value.

Question 115

This graph is based on the assumption that the net margin is constant over time and that the time frame in question is three years.

Question 116

Figure 9: Steps to Calculate Customer Lifetime Value

Question 117

Regarding practical implementation, two scenarios or approaches can be distinguished.

Answer 117

Sometimes it is of interest to calculate the customer lifetime value of an individual customer.

Question 118

Sometimes it is of interest to calculate the customer lifetime value of an individual customer.

Answer 118

In this case all the figures for the five steps mentioned above need to be available on a per customer base.

Question 119

Very often, the customer lifetime value is calculated for?

Answer 119

a group or category of homogenous customers.

Question 120

This does not change the steps of the calculation. However, figures are now only needed on?

Answer 120

a customer group or category level. Additionally, a retention rate is required to calculate the number of customers remaining from one period to the next.

Question 121

Case Study on Customer Lifetime Value

To illustrate the customer lifetime value calculation we conclude this unit with

Answer 121

a simple case study.

Question 122

The company Brand New Limited plans to extend its services to a new customer segment based in the following data:

Answer 122

The planning horizon is three years. It is expected to gain 20,000 new customers with the service provided.

Answer 123

The expected retention rate for the first year is 60 %. For the following two years it is expected that the retention rate will increase to 65 % and then to 70 %.

Answer 124

Moreover, it is expected that the customers make 1.8 orders on average in the first year. This is expected to increase to 2.6 in year two and 3.6 in year three.

Answer 125

The average order size in year one is $2,980. In year two it is expected that this increase to $5,589 and in year three to $9,106.

Answer 126

The direct costs are available as a percentage of the average costs. They are 70 % in year one, 65 % in year two and 63 % in year three.

Answer 127

To win the new customers, the average acquisition costs for marketing and other activities per customer are $630.

Answer 128

The weighted average capital costs (WACC) for the first year are 13.0 %. However, based on a market study it is expected that capital costs will significantly increase after year one. In year two, costs are estimated to be 34.5 % and for year three 36.3 %.

Question 129

The following table shows the calculation of the customer lifetime value based on?

Answer 129

the above information and following the steps of customer lifetime value calculation.

Answer 130

Table 4: Example of Customer Lifetime Value Calculation

Answer 131

Table 4: Example of Customer Lifetime Value Calculation

Question 132

Benchmarking

We will conclude this unit about customer profitability with some general aspects of bench­marking, since

Answer 132

this is an important tool not only in customer analysis, but also performance measurement and business improvement in general.

Question 133

Benchmarking

Answer 133

Benchmarking has established its position as a tool to improve an organization’s performance and competitiveness in the business world.

Recently, the process of benchmarking has extended from only looking at large companies to also include small businesses as well as the public sector.

Question 134

Experts and different theorists have provided?

Answer 134

various definitions and classifications in accordance with the time and criteria they focus on.

Question 135

Some argue that benchmarking is?

Answer 135

first and foremost a tool for improvement and it is performed through comparison with more successful competitors. Therefore, it is clear that the central essence of benchmarking is learning how to improve activities, processes, and management.

Question 136

Benchmarking is practiced and understood as an integrated matrix or system with two dimensions:

Answer 136

What is to be compared to what?
What the comparison is being made against?

Question 137

What is important is that in the benchmarking matrix ?

Answer 137

each possible combination should be evaluated according to its relevance and subdivided into three categories: high, medium, and low.

Question 138

Thus, the performance benchmarking can be defined as?

Answer 138

a comparison of performance mea­sures for the purpose of determining how well the company is doing compared to others.

Question 139

Process benchmarking concerns methods and processes aiming at?

Answer 139

improving the operation processes of organizations.

Question 140

The basis of comparison using the benchmarking approach is ?

Answer 140

the organization itself (internal benchmarking), competitors, industry,

or technology (functional benchmarking)

and, finally, best practices irrespective of the specific industry (generic benchmarking).

Question 141

The process of benchmarking research generates five different comparison targets:

Answer 141

performance
technology
process
competence
strategy

Question 142

Graphically, the process can be presented in simple cycle shown below.

Answer 142

Figure 10: Benchmarking

Question 143

Whichever methodology or type of benchmarking is used, it becomes an essential tool for؟

Answer 143

organizations to help them quickly identify benchmarks, benchmarking partners, and best practices.

Question 144

Although experts tend to break benchmarking down into several types, most benchmarking experts apply two main types:

Answer 144

‘informal’ and ‘formal’ benchmarking.

Question 145

Informal benchmarking is ?

Answer 145

a type of benchmarking that is unconsciously practiced by people at work or in their private life.

Question 146

People constantly compare themselves to others and learn from their behavior and practices-whether?

Answer 146

it is how to use a software program,

how to cook a better meal,

or improve their performance in a favorite sport.

Question 147

In the context of organizations, most lessons from informal benchmarking can be derived from the following:

Answer 147

talking to colleagues and learning from their experience (coffee breaks and team meetings are a great place to network and learn from others)

Answer 148

consulting with experts (e.g. business consultants who have experience in implementing a particular process or activity in many business environments)

Answer 149

networking with other people from different organizations during conferences, seminars and Internet forums

Answer 150

online databases\/websites and publications which share benchmarking information provide quick and easy ways to learn about the best practices and benchmarks

Question 151

As far as formal types of benchmarking are concerned, there are two main types:

Answer 151

performance and
best practice benchmarking.

Question 152

Performance benchmarking involves?

Answer 152

comparing the performance levels of organizations for a specific process.

Question 153

This information can then be used to identify?

Answer 153

opportunities for improvement and\/or setting performance targets.

Question 154

Performance levels of other organizations are normally called?

Answer 154

Performance levels of other organizations are normally called

Question 155

Performance benchmarking may involve?

Answer 155

the comparison of financial measures (such as expenditure, cost of labor, cost of buildings and equipment, cost of energy, adherence to budget, cash flow, revenue collected, etc.)

or non-financial measures (such as absenteeism, staff turnover, the percentage of administrative staff to front-line staff, budget processing time, complaints, environmental impact, or call centre performance).

Question 156

Best practice benchmarking is?

Answer 156

where organizations search for and study organizations which are high performers in particular areas of interest.

Question 157

The focus lies on the actual processes within those businesses rather than?

Answer 157

just the associated performance levels.

Question 158

This information is usually gathered through some mutually beneficial agreement which follows a ?

Answer 158

benchmarking code of conduct.

Question 159

Knowledge gained through the study is?

Answer 159

evaluated and where feasible and appropriate, these processes are adapted and incorporated into the organization.

Question 160

Therefore, best practice benchmarking involves?

Answer 160

the whole process of identifying,
capturing, analyzing, and implementing best practices.

There are a number of best practices benchmarking methodologies for undertaking this process.

Question 161

There are a number of obstacles which organizations face when they actively participate in benchmarking. These obstacles prevent?

Answer 161

others from attempting active involvement.

Question 162

Some recent findings have indicated certain key obstacles encountered during the process of benchmarking. These include:

Answer 162

=finding suitable partners
=difficulties in comparing data
=resource constraints (time, finance, and expertise)
=staff resistance

Question 163

Since a benchmarking analysis is so closely linked to ————————————–, many of the benefits attributed to one organization can also be attributed to ——————. When an organization de­­sires to reach performance levels judged as ‘world-class’ or ‘best-in class’, it will focus on the importance of——————– and the process of —————————–, which is clearly indicated in various business excellence models and their ———————–.

Answer 163

business excellence

the other

benchmarks

benchmarking

scoring systems

Question 164

Many case studies solely focus on ?

Answer 164

organizations when determining the success gained through benchmarking.

Question 165

The best known examples are perhaps ?

Answer 165

the experiences at Xerox and Chrysler.

Question 166

During the late 1970s and early 1980s, Xerox faced ruin due to?

Answer 166

more efficient Japanese competitors.

Question 167

The process of benchmarking turned Xerox around and put it back at?

Answer 167

the top of the market.

Question 168

The Chrysler Corporation saved three billion dollars in development costs and time by?

Answer 168

benchmarking new Japanese product development techniques prior to developing the new Viper sports car.

Question 169

benchmarking new Japanese product development techniques prior to?

Answer 169

developing the new Viper sports car.

Question 170

From a financial perspective, payback is likely to vary and depends on ?

Answer 170

the specific aims of the project.

Question 171

When projects are carefully selected, planned, and managed,———————————————————————————————–should not be gained.

Answer 171

there is no reason why major benefits (e.g. financial and non-financial)

Question 172

In summary, there are many different ways to examine an organization’s activities and measure its financial and operational performance. Therefore, before looking at the organization itself, investors, creditors, and all key stakeholders should examine?

Answer 172

the respective financial and operating performance.

Question 173

A variety of techniques come into play when ?

Answer 173

forecasting the cyclical short- and long-term trends of business conditions. But there is no one perfect approach.

Question 174

Methods solely designed for measuring these conditions are ——————————-

Answer 174

–not reliable.

Question 175

These measures should be used in?

Answer 175

conjunction with a review of the organization’s financial statements in order get a better picture of the overall ‘health’ and condition of the association.

Question 176

We looked at the ?

Answer 176

components that make up a customer profitability analysis and the basic categories of customer lifetime value.

Question 177

Traditionally, profitability analysis assigns revenues and costs to actual products in order to ?

Answer 177

inform companies about which product is profitable and which one is not.

Question 178

The customer profitability analysis takes a different approach. Revenues and costs are assigned to ?

Answer 178

segments of the customer base in order to determine customer profit­ability.

Question 179

We now understand that customer lifetime value is a metric which is calculated by ?

Answer 179

subtracting the forecasted net cash flows from the risk-adjusted cost of capital.

Question 180

The three basic categories of customer lifetime value are?

Answer 180

retention rate, revenue, and costs.